Where are the Cheap Firms Internationally?
Last week, Wes had a short post entitled, Where are the Cheap Firms?
The post showed that when we look at the cheapest stocks in the U.S. stock market, we see that a few industries predominate today, notably energy (mostly oil-related) and consumer discretionary.
We wondered what things looked like in developed international markets, but at a country level. That is, when we look at the cheapest stocks available worldwide, in which countries will we find the cheapest stocks?
First, what does the universe look like? We examine 1035 securities that are deep and liquid in the developed markets:
It is worth noting that Japan has many more tradeable stocks than many of these other countries.
Country weigths based on stock-selection using EBIT/TEV:
Norway, with a 6% weight, actually has a higher EBIT/EV yield (at 20.22%) in its cheapest decile than Japan (at 14.69%), it has many fewer stocks, and so receives a lower allocation versus Japan’s 55% weight. In general, the world’s cheap stocks reside in Japan.
How about another valuation metric? P/E:
A different story here: Japan has a huge weight, but Hong Kong plays a much bigger role.
What is “cheap” depends on how you define cheapness. However, some interesting bargain hunting can be found in Japan, Norway, and Hong Kong.
Note: This site provides NO information on our value investing ETFs or our momentum investing ETFs. Please refer to this site.
Join thousands of other readers and subscribe to our blog.
Please remember that past performance is not an indicator of future results. Please read our full disclosures. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. This material has been provided to you solely for information and educational purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The factual information set forth herein has been obtained or derived from sources believed by the author and Alpha Architect to be reliable but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Alpha Architect.
Definitions of common statistics used in our analysis are available here (towards the bottom)